Boyd v. Bowen

DEBORAH S. EYLER, Judge. Mary Jo Boyd, the appellant, made a claim against the Estate of Marion E. Cole (“the Estate”) for monies she paid on Mrs. Cole’s behalf, during Mrs. Cole’s lifetime. Perry G. Bowen, Jr., Personal Representative of the Estate, the appellee, denied all but a small portion of the claim. The appellant petitioned the Orphans’ Court for Calvert County for payment of the disallowed claim.

The orphans’ court held a hearing and granted the claim. On behalf of the Estate, the appellee filed an action for a de novo appeal in the Circuit Court for Calvert County. The court held an evidentiary hearing, and at the close of the appellant’s case granted the appellee’s motion for judgment. On appeal, the appellant presents six questions for review.

We have combined, reworded, and reformulated the questions as follows: I. Did the trial court err by not applying an evidentiary presumption that the decedent had agreed to repay the appellant?

II

Did the trial court err in: 1) allowing the appellee to assert the affirmative defenses of res judicata and collateral estoppel at trial, when they were not pleaded; 2) ruling that under the doctrine of collateral estoppel, the issue of incompetence of the decedent had been conclusively decided in a prior proceeding between the parties or their privies; and 3) ruling that the appellant’s claim was barred by the doctrine of res judicata?

III

Did the trial court err in ruling that certain checks written by the appellant were inadmissible evidence? ⁶⁴⁴ IV. Did the trial court err in declining to rule that the appellee had waived by his conduct the Estate’s right to appeal the orphans’ court’s order? V. Did the trial court err in: 1) considering the defense of limitations; and 2) ruling that the appellant’s claim was time-barred? For the following reasons, we answer “no” to questions I, III, and IV, and “yes” to questions II and V. Accordingly, we shall vacate the judgment of the circuit court and remand the case to that court for further proceedings.

FACTS AND PROCEEDINGS The appellant and Marion E. Cole met in 1980 and became close friends. Both women lived in Calvert County. Although the record does not reveal Mrs. Cole’s age, there is reference to her being elderly. Mrs. Cole was a widow, and apparently did not have any children.

She had several nieces and nephews, including Gilbert A. Cole, Jr., who lives in Silver Spring, Maryland. On May 17, 1990, Mrs. Cole executed a Power of Attorney naming the appellee as her attorney-in-fact. About a month later, on June 12, 1990, she executed her Last Will and Testament (“Will”). The appellee was named Personal Representative in Mrs. Cole’s Will.

The Will named several legatees, including the appellant, who was bequeathed $10,000. On July 20, 1994, Mrs. Cole executed a codicil to her Will, adding a bequest that is not relevant to this case. On January 8, 1996, the appellant drove Mrs. Cole to the Rockville law office of Lawrence A. Arch, Esquire. The purpose of the visit was for Mrs. Cole to retain Mr. Arch to draft a new will and power of attorney revoking her 1990 Will and Power of Attorney.

At the January 3,1996 meeting -with Mr. Arch, the appellant wrote Mr. Arch a check in the amount of $1,000, in payment of Mr. Arch’s retainer fee, on behalf of Mrs. Cole. ⁶⁴⁵ Anticipating that Mrs. Cole’s competency to execute a new Will and Power of Attorney would be questioned, Mr. Arch arranged for Richard Epstein, M.D., a psychiatrist, to perform a competency examination. On January 29, 1996, the appellant -wrote Dr. Epstein a check for $3,250, for his fee for Mrs. Cole’s competency examination. On February 19, 1996, Mrs. Cole executed a new Power of Attorney naming the appellant as her attorney-in-fact. The same day, she executed a new Will naming the appellant as her Personal Representative.

In the new Will, Mrs. Cole included the $10,000 bequest to the appellant that had existed in the 1990 Will, and also bequeathed her 20% of the residuary estate. Also on February 19, 1996, the appellant wrote two more checks to Mr. Arch, for $1,552 and for $500, in payment of Mr. Arch’s services on behalf of Mrs. Cole, and at Mr. Arch’s request, the appellant and Mrs. Cole signed a one-page retainer agreement stating, inter alia, that even though the appellant had paid Mr. Arch’s fee, he was representing Mrs. Cole, not the appellant. The retainer agreement further stated: “You [meaning the appellant] have written checks for my [Mr. Arch’s] fees, subject to reimbursement at a later date from Marion E. Cole.” Around the same time, the appellant wrote two other checks for much smaller sums, to Parcel Plus and to another business, also in connection with Mr. Arch’s representation of Mrs. Cole. Soon thereafter, the appellee filed a declaratory judgment action (“the competency case”), in the Circuit Court for Calvert County, asking the court to determine whether Mrs. Cole had been mentally competent to execute her new Power of Attorney and Will (and thereby to revoke her 1990 Power of Attorney and Will).

Mr. Arch, on behalf of Mrs. Cole, defended the case, asserting that Mrs. Cole had been competent at the relevant time. In addition, Mr. Arch asked the court to direct the payment of his attorney’s fee out of Mrs. Cole’s assets. ⁶⁴⁶ On March 8, 1996, the judge assigned to the competency case had “direct contact” with Mrs. Cole, to evaluate her condition. Thereafter, the court held an evidentiary hearing. On June 13, 1996, the court in the competency case issued a declaratory judgment stating, inter alia, that on January 3, 1996, and February 19, 1996, Mrs. Cole had “lacked sufficient mental capacity to execute legal documents, to manage her affairs and property effectively, or to make reasoned decisions with respect thereto.” The court found that Mrs. Cole had not had sufficient mental capacity, either on January 3, or February 19, 1996, to revoke her 1990 Power of Attorney and 1990 Will, and that the 1990 instruments therefore remained valid and in effect.

The court in the competency case further found Mrs. Cole to be a disabled person in need of a guardian of her property, under Md.Code (1991 RepLVol., 1996 Supp.), section 13-101 of the Estates and Trusts Article (“ET”). It appointed Gilbert A. Cole, Jr., to act in that capacity, and directed Mr. Cole to pay certain specific expenses from Mrs. Cole’s guardianship estate. The court denied Mr. Arch’s request for payment of his attorney’s fee from the guardianship estate. Apparently, no appeal was taken.

Slightly more than three years later, on July 21, 1999, Mrs. Cole died. In accordance with the directive in her 1990 Will, the appellee was named Personal Representative of Mrs. Cole’s estate. On September 28, 1999, the appellant made a claim against the Estate for $6,770.99, which she alleged was the total amount paid by her on Mrs. Cole’s behalf for attorney’s fees for Mr. Arch, for Dr. Epstein’s fee for his competency examination, and for other bills she (the appellant) had paid for Mrs. Cole’s benefit, from January 3, 1996, to April 1996. On February 4, 2000, the appellee denied the appellant’s claim, except for $61.75.

On March 31, 2000, the appellant filed a Petition for Payment of Disallowed Claim, in the Orphans’ Court for Calvert ⁶⁴⁷ County. That court held a hearing on her claim, on June 20, 2000. A few weeks later, on July 11, 2000, the orphans’ court granted the claim, in the amount of $6,700. The appellee, as Personal Representative of the Estate, noted an appeal to the Circuit Court for Calvert County.

On May 21, 2001, the court held a de novo evidentiary hearing. The presiding judge was the same judge who had presided over the competency case, in 1996. The appellant testified on her own behalf and called Mr. Arch as a witness. The appellant stated that when she made the payments to Mr. Arch, Dr. Epstein, and otherwise on behalf of Mrs. Cole, she did so with the expectation that she would be reimbursed by Mrs. Cole.

She did not receive reimbursement, however. The evidence adduced by the appellant is as we have recited. At the close of the appellant’s case, the appellee moved for judgment. After hearing lengthy argument of counsel, the court granted the motion.

Four days later, the court issued a written memorandum opinion and order explaining its findings and legal analysis. The court made its ruling on some interrelated grounds, and on some alternative grounds. It ruled that the evidence presented by the appellant did not show by a preponderance of the evidence that Mrs. Cole had agreed to repay the appellant the sums the appellant had paid to Mr. Arch and Dr. Epstein. 1 The court rejected the appellant’s argument that as a non-family member of Mrs. Cole, she was entitled to an evidentiary presumption that she made the payments to Mr. Arch and Dr. Epstein upon an agreement by Mrs. Cole to reimburse her. The court pointed out that the presumption that family members render services to a decedent gratis, which is recognized in the law, applies to the rendering of services, not to the advancing of funds, and the appellant did ⁶⁴⁸ not present any evidence that she had rendered services to Mrs. Cole.

The court further explained that, contrary to the appellant’s argument, it does not follow from the recognized presumption, stated above, that there also is a presumption that non-family members who render services for a decedent are presumed do so with the understanding that they will be paid for their services. Thus, even if the recognized presumption were extended from services to advancements, that would not support the appellant’s position that she was entitled to an evidentiary presumption that Mrs. Cole had agreed to repay her. The court went on to rule that even. if the evidentiary presumption the appellant was advocating existed, it was rebutted by the court’s determination, in the 1996 competency case, that Mrs. Cole was mentally incompetent on January 3, and February 19,1996, when the appellant wrote the checks to Mr. Arch and Dr. Epstein, and when the appellant and Mrs. Cole signed Mr. Arch’s retainer agreement. The court stated: The law ... provides protection for the incompetent and does not permit those found to. be incompetent to bind themselves into a contractual arrangement for money.

It is irrelevant whether at the time of the agreement, [the appellant] was aware of Ms. Cole’s incompetency. Ms. Cole and [the appellant] had been friends for over sixteen years. The [c]ourt is confident that anyone who spent any amount of time with Ms. Cole, as [the appellant] testified she-had, would recognize that Ms. Cole lacked the mental capacity to care for her personal and financial matters. ■ Regardless, if any agreement of repayment existed, it was void because of the court’s ruling in [the competency case], finding Ms. Cole to be incompetent at the time of this transaction. The court also ruled, alternatively, that the appellant’s claim against the Estate was barred by the doctrine of res judicata, at least insofar as the claim for reimbursement of the fees paid ⁶⁴⁹ by the appellant to Mr. Arch was concerned. 2 The court found that when Mr. Arch sought payment of his attorney’s fees, in the competency case, the appellant was on notice of the claim, and was in privity with Mr. Arch.

The court in the competency case had denied Mr. Arch’s claim for fees because it had found Mrs. Cole not to have been competent to enter into a contract to pay legal fees. The court in this case ruled that the judgment in the competency case was a bar to the appellant pursuing a claim against Mrs. Cole’s Estate for reimbursement of the attorney’s fees the appellant had paid to Mr. Arch. Finally, the court ruled, also as an alternative ground, that the appellant’s claim was barred by the three-year statute of limitations for breach of contract actions. The court reasoned that even if Mrs. Cole had agreed to repay the appellant, and had been competent to enter into such an agreement, the promise to repay was made in early 1996, when the payments to Mr. Arch and Dr. Epstein were made.

The appellant had three years from then to file suit against Mrs. Cole, or her guardianship estate. She failed to do so. By the time the appellant made her claim against Mrs. Cole’s Estate, in September 1999, it was time-barred. From the judgment entered by the circuit court, the appellant noted a timely appeal to this Court.

We will recount additional facts as necessary to our discussion of the issues. DISCUSSION I. When a defendant moves for judgment at the close of the evidence presented by the plaintiff in an action tried by the court, the court may proceed, as the trier of fact, to determine the facts and render judgment against the plaintiff. ⁶⁵⁰ Md. Rule 2-519(b). In that circumstance, unlike in a jury trial, the trial court is not compelled to view the evidence in the light most favorable to the plaintiff. Pahanish v. Western Trails, Inc., 69 Md.App. 342, 353 , 517 A.2d 1122 (1986).

On appeal, we review the trial court’s decision to grant a defendant’s motion for judgment at the close of the plaintiffs case in a court trial under Md. Rule 8-181(c): When an action has been tried without a jury, the appellate court will review the case on both the law and the evidence. It will not set aside the judgment of the trial court on the evidence unless clearly erroneous, and will give due regard to the opportunity of the trial court to judge the credibility of the witnesses. The appellant contends that the trial court erred in finding the evidence insufficient to support a finding that Mrs. Cole agreed to repay her, because the court failed to apply and weigh as an item of evidence a presumption that “the rendering of services or the advancement of money by a non-family member is to be repaid.” The appellant maintains that the court’s failure to apply this evidentiary presumption ran contrary to “[a] line of case law from the Court of Appeals going back over a hundred years.... ” The cases the appellant cites do not support her argument that she was entitled to the evidentiary presumption she describes. The appellant quotes the following passage from Bantz v. Bantz, 52 Md. 686 (1880): In order to justify a claim for services being allowed against a decedent, there must have been a design, at the time of the rendition, to charge, and an expectation on the part of the recipient to pay for the services.

The services must have been of such character, and rendered under such circumstances, as to fairly imply an understanding of payment, and a promise to pay. There must have been an express, or implied understanding between the patties that a charge for the services was to be made, and to be met by payment. ⁶⁵¹ Id. at 693 (emphasis added). The appellant also quotes a proviso to that rule, as stated in Bixler v. Sellman, 77 Md. 494, 496 , 27 A. 137 (1893), that while the law generally will imply a promise to pay for services rendered to and accepted by the decedent during his or her lifetime, “a well recognized distinction exists where the service is rendered by a member of the family of the person served. In the latter case a presumption of law arises that such services are gratuitous.” These cases, read together, establish that a claim for payment of services rendered to a decedent can be based on evidence of an express contract to pay for the services or on evidence of an implied-in-fact contract to do so; but when the services were rendered by a family member, they are presumed to have been rendered for free.

The trial court correctly observed that these cases address the rendering of services, not the advancing of funds. There was no evidence in this case that the appellant rendered services for Mrs. Cole and was seeking payment for services. Accordingly, the cases are not applicable to the case at bar. The trial court also correctly concluded that even if the principles established in these cases are extended to apply to the advancing of funds (which we do not), there still is no evidentiary presumption, in favor of a non-family member, that the decedent agreed to repay the advanced funds.

We agree with the trial court that the existence of a presumption that services rendered, or funds advanced, to a decedent by family members are gifts does not logically give rise to a corresponding presumption that when non-family members render services or advance funds to a decedent, they do so upon an agreement by the decedent to pay for the services or repay the advanced funds, as the case may be. Indeed, as we shall explain, such a presumption is inconsistent with the principle stated in Bantz v. Bantz, supra, that it is permissible to draw an inference from the fact that services were rendered (or monies advanced) to a decedent during his or her lifetime that the decedent agreed to pay for the services (or repay the advanced sums). ⁶⁵² In a civil case, an evidentiary presumption will satisfy the favored party’s burden of production on the issue to which the presumption applies, and will shift to the opposing party the burden to produce evidence to rebut the presumed fact. “If that party introduces evidence tending to disprove the presumed fact, the presumption will retain the effect of creating a question to be decided by the trier of fact unless the court concludes that such evidence is legally insufficient or is so conclusive that it rebuts the presumption as a matter of law.” Md. Rule 5-301(a). “[P]resumptions do not affect the burden of persuasion. A presumption merely satisfies the burden of production on the fact presumed and, in the absence of rebutting evidence, may satisfy the burden of persuasion.” Carrion v. Linzey, 342 Md. 266, 279 , 675 A.2d 527 (1996)(quoting Alan D. Hornstein, The New Maryland Rules of Evidence: Survey, Analysis and Critique, 54 Md. L.Rev. 1032, 1049 (1995)). The practical effect of the presumption that services rendered to a decedent by a family member are rendered without expectation or promise of payment is to prohibit, not permit, the drawing of an inference of a promise to pay from the rendering of services in claims by family members against decedents’ estates.

In claims by non-family members, however, the inference of a promise to pay is permitted. A non-family member claimant can meet his burden of production on the issue of whether the decedent made an agreement to pay by presenting proof of the rendering of services (or, if the presumption were to be extended, of the advancing of sums). This permissible inference does not shift the burden to the decedent’s estate to present evidence to rebut the fact of a promise to pay. Unlike a presumption, which has the effect of shifting the burden of production on the presumed fact to the opposing party, a permissible inference “has the effect only of meeting the proponent’s burden of production but not shifting that burden to the opposing party,.... ” McQuay v. Schertle, 126 Md.App. 556, 592 , 730 A.2d 714 (1999)(quoting Reporter’s Note to Rule 5-301(a)).

Thus, the ⁶⁵³ existence of a presumption that family members do not render services (or advance funds) upon a promise of payment means, at most, that in the case of a non-family member, a permissible inference of a promise to pay may be drawn from the rendering of services (or advancing of funds). It does not mean that there is a presumption of a promise of payment. In the case at bar, the trial court explained that even factoring out the issue of competency, there was little reason to conclude from Mrs. Cole’s conduct in accepting the appellant’s “advancement” of monies, that Mrs. Cole had agreed to repay the appellant the sums advanced. Mrs. Cole had substantial assets.

Indeed, the value of her Estate ultimately was determined to be close to $2 million dollars. Many of her assets were liquid, including substantial sums in bank accounts. When the two women visited Mr. Arch, Mrs. Cole still had access to her accounts and could have written a check. There was no financial need, therefore, for the appellant to advance money to Mrs. Cole, or on her behalf.

Moreover, as the trial court explained, there was evidence that the appellant took Mrs. Cole to Mr. Arch to have Mrs. Cole revise her 1990 Will so as to name the appellant as her Personal Representative. That change, given the size of Mrs. Cole’s Estate, would have worked to the appellant’s financial benefit. In addition, the new Will contained a significant additional bequest to the appellant of 20% of Mrs. Cole’s residuary estate. If the new Will stood up to challenge, the appellant would have received a tremendous monetary benefit, far in excess of the sums she paid to Mr. Arch and Dr. Epstein.

Thus, the evidence showed that the appellant had a strong incentive to pay the sums to Mr. Arch and Dr. Epstein without any promise, express or implied, of repayment by Mrs. Cole, because the appellant stood to gain from Mr. Arch’s legal representation of Mrs. Cole, including Mr. Arch’s assertion of competency through evidence provided by Dr. Epstein. In short, the trial court, having rendered the retainer agreement a nullity, reasonably could conclude from the facts ⁶⁵⁴ surrounding the appellant’s payment of fees to Mr. Arch and Dr. Epstein, as testified to by the appellant and by Mr. Arch, that Mrs. Cole did not agree to repay the sums the appellant paid to Mr. Arch and Dr. Epstein.

II

As noted above, the trial court also concluded that even if it were to find that the evidence of the appellant’s payments to Mr. Arch and Dr. Epstein, and of the reference to reimbursement in Mr. Arch’s retainer agreement, favored a finding that Mrs. Cole indeed had agreed, expressly or impliedly, to repay the appellant, that evidence was negated by the judicially determined fact, in the 1996 competency case, of Mrs. Cole’s mental incompetency and lack of capacity to enter into a contract at the relevant time. In other words, it appears that the court applied the doctrine of collateral estoppel at trial, ruling that the issue of Mrs. Cole’s mental competency in early 1996, the time frame relevant to this case, was conclusively established in the competency case. As an alternative ground, the court ruled that the appellant’s claim for repayment of Mr. Arch’s fee was barred by the doctrine of res judicata. The appellant initially contends the trial court erred as a matter of law in considering the defenses of collateral estoppel and res judicata, because they were not pleaded.

On the merits, she argues that the trial court incorrectly applied the doctrines, because she was not a party to or in privity with a party to the competency case, as a matter of law. Rule 2-323 provides that all defenses of law or fact to claims filed must be asserted in an answer. Subsection (g) enumerates various affirmative defenses, including collateral estoppel and res judicata, that must be “set forth by separate defenses.” It is well-settled Maryland law that any of the listed affirmative defenses not included in the answer are deemed waived. Liberty Mutual Insurance Co. v. Ben Lewis Plumbing, Heating & Air Conditioning, Inc., 121 Md.App. 467, 478 , 710 A.2d 338 (1998), aff'd, 354 Md. 452 , 731 A.2d 904 (1999); ⁶⁵⁵ Gooch v. Maryland, Mechanical Systems, Inc., 81 Md.App. 376, 385 , 567 A.2d 954 (1990).

Rule 8-131 governs the scope of appellate review in this Court. Subsection (a) states, “[o]rdinarily, the appellate court will not decide any other issue unless it plainly appears by the record to have been raised in or decided by the trial court. ...” In the case at bar, when the appellee raised the issues of res judicata and collateral estoppel at trial, despite not having pleaded them, the appellant responded on the merits, rather than asserting that the appellee had waived the defenses. Accordingly, the appellant did not preserve the waiver issue she seeks to raise on appeal, and we decline to address it. Instead, we shall turn to the merits of the appellant’s res judicata /collateral estoppel contention.

The doctrine of res judicata, also called claim preclusion, applies when the parties to a second suit are the same or in privity with the parties to a first suit; the first and second suits present the same claim or cause of action; and there was a final judgment rendered on the merits in the first suit, by a court of competent jurisdiction. FWB Bank v. Richman, 354 Md. 472, 492 , 731 A.2d 916 (1999) (citing deLeon v. Slear, 328 Md. 569, 580 , 616 A.2d 380 (1992)); Poteet v. Sauter, 136 Md.App. 383, 411 , 766 A.2d 150 (2001). When those three elements have been satisfied, the first claim is merged into the judgment and bars the second claim. Claim preclusion is a judicially created doctrine that serves the objective of finality.

When one party has had his claim against another party fully and fairly adjudicated on the merits by a court of competent jurisdiction, the doctrine of res judicata avoids “ ‘the expense and vexation attending multiple lawsuits, conserves judicial resources, and fosters reliance on judicial action by minimizing the possibilities of inconsistent decisions.’ ” Poteet v. Sauter, supra, 136 Md.App. at 411 , 766 A.2d 150 (quoting Murray International Freight Corp. v. Graham, 315 Md. 543, 547 , 555 A.2d 502 (1989)(quoting Montana v. United States, 440 U.S. 147, 153-54 , 99 S.Ct. 970 , 59 ⁶⁵⁶ L.Ed.2d 210 (1979))). See Maryland, State Dep’t of Education v. Shoop, 119 Md.App. 181, 200 , 704 A.2d 499 (1998). In Kent County Board of Education v. Bilbrough, 309 Md. 487, 499-500 , 525 A.2d 232 (1987), the Court of Appeals held that for purposes of res judicata, whether claims are the same is to be determined by the “transaction test,” as set forth in section 24 of the Restatement (Second) of Judgments. Under the transaction test, a “claim” includes all rights of the plaintiff to remedies against the defendant with respect to all or any part of the transaction, or series of connected transactions, out of which the claim arose.

FWB Bank v. Richman, supra, 354 Md. at 493, 731 A.2d 916 . Therefore, when the claim is extinguished, all such rights of the plaintiff to such remedies are extinguished as well. Id. See also Patel v. HealthPlus, Inc., 112 Md.App. 251, 282-83 , 684 A.2d 904 (1996).

Under the transaction test, what factual grouping constitutes a “transaction” and what groupings constitute a series of connected “transactions” are to be determined “pragmatically, giving weight to such considerations as whether facts are related in time, space, origin, or motivation, whether they form a convenient trial unit, and whether their treatment as a unit conforms to the parties’ expectations or business understanding or usage.” Kent County Board of Education v. Bilbrough, supra, 309 Md. at 498 , 525 A.2d 232 (quoting Restatement (Second) of Judgments § 24). See also FWB Bank v. Richman, supra, 354 Md. at 493, 731 A.2d 916 . Because a “claim” encompasses all rights the plaintiff has to remedies against the defendant respecting all or any. part of the transaction or series of connected transactions out of which the claim arises, the doctrine of res judicata bars subsequent litigation not only of what was decided in the original litigation of the claim but also of what could have been decided in that original litigation. Gertz v. Anne Arundel County, 339 Md. 261, 269 , 661 A.2d 1157 (1995).

As the Court of Appeals explained in Alvey v. Alvey, ⁶⁵⁷ a judgment between the same parties and their privies is a final bar to any other suit upon the same cause of action, and is conclusive, not only as to all matters that have been decided in the